Mortgage Glossary

Agreement of Purchase and Sale
Amortization Period
Appraisal
Blended Payments
Bridge Financing
Canada Mortgage and Housing Corporation (CMHC)
Closed Mortgage
Closing Date
Commitment Letter
Conditional Offer
Conventional Mortgage
Deposit
Discharge
Equity
Firm Offer
First Mortgage
Gross Debt Service Ratio
High-Ratio Mortgage
Interest Adjustment
Maturity Date
Mortgage Insurance Premium
Mortgage Term
Mortgagee
Mortgagor
Penalty
Portability
Pre-Approved Mortgage
Prepayment Option
Principal
Rate Commitment
Refinance
Renewal
Second Mortgage
Total Debt Services Ratio
Title

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Agreement of Purchase and Sale
A contract by which one party agrees to sell and another agrees to purchase.
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Amortization Period
The number of years it takes to repay the entire amount of the mortgage. (eg. 20-25 years)
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Appraisal
An independent estimate of the property value by a certified appraiser on a specific date. The value may or may not be the same as the purchase price of the home.
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Blended Payments
Equal payments comprised of part principal and part interest on the outstanding debt for the chosen term. The principal portion of this payment increases each month while the interest portion decreases. The monthly payment remains a fixed amount and does not change during the term.
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Bridge Financing
Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home.
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Canada Mortgage and Housing Corporation (CMHC)
The Government of Canada's national housing agency. They are authorized by The National Housing Act to operate a Mortgage Insurance Fund which protects lenders from losses resulting from borrowers who default on their payments.
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Closed Mortgage
A mortgage agreement that cannot be prepaid, renegotiated or refinanced before maturity except on payment of a penalty.
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Closing Date
The date on which the sale of a property becomes final and the new owner takes possession.
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Commitment Letter
A letter issued by the lender which sets out the terms, conditions, and loan amount under which a lender is prepared to lend in the form of a mortgage.
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Conditional Offer
An offer to purchase subject to specified conditions. These conditions may relate to arranging a mortgage or selling an existing home. There is usually a time limit for which these conditions must be met.
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Conventional Mortgage
Maximum loan to value ratio of 75% based on whichever is less: the purchase price or the appraised value. The lender does not require mortgage loan insurance.
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Deposit
Money paid by the purchaser on making an offer. Usually held in trust by the real estate broker or the vendor' lawyer until the closing of the transaction.
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Discharge
The removal of all mortgages and financial debts on the property.
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Equity
The current value of your home minus the total mortgages you have against it.
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Firm Offer
An offer to buy the property as outlined in the offer to purchase with no conditions attached.
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First Mortgage
Mortgage given the first priority at the registry office. It can be conventional or high-ratio and they give borrowers the best rate of interest.
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Gross Debt Service Ratio (GDSR)
One of the calculations used by lenders to determine the percentage of the borrowers gross income that will be used for monthly payments of principal, interest, taxes, heating costs and condominium fees.
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High-Ratio Mortgage
For loan to value ratios greater than 75%, lenders will require mortgage insurance to protect against payment default. The mortgage insurance companies use a sliding scale insurance premium based on the loan to value ratio.
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Interest Adjustment
Interest calculated on a mortgage loan for the number of days between the closing date and the end of the month. The Borrower will have to pay this amount at through their lawyer on the closing date.
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Maturity Date
The last day of the term of the mortgage agreement.
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Mortgage Insurance Premium
A premium that is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance protects the lender against loss in case of default by the borrower.
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Mortgage Term
The number of years or months that your mortgage rate is locked in for. Terms usually range from six months to ten years.
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Mortgagee
The lender.
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Mortgagor
The borrower.
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Penalty
A sum of money paid to a lender for the privilege of prepaying a mortgage in part or in full.
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Portability
The ability to transfer your mortgage including rate and terms, from your existing property to a new property assuming the property meets the criteria outlined by the lender.
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Pre-Approved Mortgage
Preliminary qualification by the lender of the borrower's application for a mortgage to a certain maximum amount and rate. It is subject to limitations and final approval and is issued for a limited time only.
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Prepayment Option
The right to pay specified amounts of the principal balance prior to the maturity date of the mortgage. Penalty interest may be incurred on prepayment options.
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Principal
The amount of loan owed to the lender at any specified time, not including interest.
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Rate Commitment
The number of days the lender will guarantee the mortgage rate on a mortgage approval. They vary from 30 to 120 days.
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Refinance
Renegotiating your existing mortgage agreement. May include increasing the principal (an "equity take out") or paying out the mortgage in full.
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Renewal
At the end of a mortgage term, the mortgage may "roll over" on new terms and conditions acceptable to both the lender and the borrower. If satisfactory terms cannot be agreed upon, the lender is entitled to be repaid in full. In this case, the borrower may seek alternative financing.
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Second Mortgage
Mortgage usually at a higher rate of interest and represents the difference between the price of the house and the first mortgage plus the downpayment. This is used for additional financing if the first mortgage does not meet the borrower's total financial requirements
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Total Debt Services Ratio
The percentage of gross income needed to cover monthly payments for housing and all other debts and financing obligations.
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Title
Evidence of ownership.
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